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I don't think it's a very good guess. You listen with an ear horn, you don't talk with one. They're not small, and in addition, if you cover it with your hand, it will not work.
Chances are, she's just supposed to be acting like a batty old lady. After all, when cell phones were first becoming common people did talk a lot about how odd it was to realized that you couldn't assume that people yammering to themselves in public weren't mentally ill any more.
I don't think it's clear at all that the woman is talking on a phone. She's doing something that we, with our modern point of view, associate with that act because we know about mobile phones. 1923 us, with a completely different reference set, would associate her actions with something else entirely.
Her behavior's definitely odd, though (I commented on the MeFi post). You're correct that we interpret this posture in a contemporary way, but there really is no simple answer to how someone in the 20s would interpret it. Speaking as someone who watches a whole bunch of historical footage and silent/Golden Age movies, it's odd behavior, and I think it's meant to look like odd behavior - ie, crazy old lady behavior.
I know that, in my childhood before cell, if we were walking down the street and encountered ssomeone acting like this, it would have occasioned my mother to cross the street.
Yeah, but no ear horn in the world explains why she's talking to nobody. In other words, for me it's not "What's in her hand" that's the issue, but "Why is she talking?" And she's clearly talking. Even if she did have an ear horn, she'd have to be batty to be talking. To no one.
She might actually be talking to the man in front of her, who may be her (impatient?) husband. They're about the same age, and notice how their footsteps and stride are nearly synched. Think how you walk when you are with, but behind, someone, especially when you are trying to keep up.
This makes more sense if it's documentary footage about the opening of his film, which some have said, but seems less likely if it was filmed on purpose and the two are extras.
Deborah, if you look here you'll see the longer version, with the guy explaining about the Chaplin dvd collection he found it on, and being very specific about the distributors, etc. You have to put up with him promoting himself and his own film in the beginning.
She might actually be talking to the man in front of her, who may be her (impatient?) husband.
I considered that, but he continues out of the frame while she stops, turns, and smiles while talking into her hand. She's not talking to him or even toward him - her eyes focus downward and she's talking downward as you would to a phone.
The emerging theory on MeFi is that it could be an Easter egg. Entirely possible and Occam's-razorlike.